investing in student property
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7/29/2019 Investing in Student Property
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GUIDE TO
INVESTING IN
STUDENT PROPERTY
info@hanwoodholdings.com
0845 8623090www.hanwoodholdings.com
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M
ost people associate buy-to-let
investment with the purchase
o one or two-bedroom
lats and trying to make single igurereturns on the residential rental market.
However savvy investors now associate
UK property investment with the rapidly
emerging student accommodation
sector which is providing extremely
healthy returns.
Recent research carried out by buy-
to-let mortgage specialist Paragon
Mortgages shows that students
generated the highest yields or
landlords in 2011. Using independent
research rom The Landlords Panel rom
BDRC Continental, the lender ound that
students generated the highest average
yield, ollowed by young singles and
retired people. At the other end o the
scale, non-housing allowance beneitclaimants generated the lowest yields,
ollowed by young couples and manual
workers.
Commenting, Nigel Terrington,
Paragon Group chie executive, says:
Yields are an important component
o a landlords overall business plan
because they give a good indication o
the income that the property generates.
Student yields typically outperorm the
wider market because they are let on
a per room basis, which can generate
higher rental income.
Ranked yield tables Landlords top 101 Students
2 Young singles
3 Retired
4 White collar or proessional workers
5 Executive/company lets
6 Local Housing Allowance claimants
7 Older couples
8 Families with children9 Young couples
10 Blue collar/manual workers
Source: Paragon Mortgages
The rapidly
emerging studentaccommodationsector is providingextremely healthyreturns
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The act that UK student
accommodation has thrived over the
past two years, rapidly outpacing the
UKs conventional property market, has not
gone unnoticed. In act its ast growth and
investment strength has been so prolic that
in January 2012, The Times ranked student
accommodation as the top asset class in theUKs property market.
Knight Franks 2012 student property
report added to the accolades, stating: It
has outperormed every other commercial
property class and delivered consistent
returns throughout the economic downturn.
The market
When compared with other residential andcommercial property, student property
stands out as consistently oering higher
returns or investors. 2010 saw student
property oering annual average returns
o 13.5% in a market where commercial
property grew by just 8% and standard
residential property ell in value by 1.3%.
Average returns across the UK were 11.5%
in 2011 and Knight Frank expects totalreturns rom student property to increase in
2012 to 12% with rental yields growing
by 5%.
James Pullan, head o student property,
Knight Frank, says: There is a large structural
undersupply o student accommodation in
the UK.
There is still strong and as yet unmet
demand or properties oered to students
or rents o less than 200 a week, oering
investors a good opportunity in the comingyears.
New unding arrangements will come in
September 2012 when tuition ees o up to
9,000 a year are introduced. However all
the early indicators suggest that once again
there will be more applications than places
oered.
In January 2012
The Timesranked studentaccommodation asthe top asset classin the UKs propertymarket
Total returns comparisons 2011 chartPast returns rom Student Accommodation
Average studio rent: 178
Average en-suite rent or 2010/11: 112
Average rental change(year to December 2010):
2%
Average capital value charge(year to December 2010):
7%
Rental yield (December 2010): 6%
Total Annual Return 2010: 13%Total Annual Return 2011: 11.5%
Forecast Annual Return 2012: 12%
Source: Knight Frank Student Housing Report
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T
he popularity o student
accommodation amongst investors
is ultimately driven by consistent
occupancy rates o 99% or higher anda structural undersupply. Demand or
purpose built student rooms amongst
students is extremely high meaning
average rental rates have risen year on year,
increasing by 34% between 2005 and 2010.
The strongest perormance in student
accommodation so ar has naturally
been centred around the most popular
university towns and cities. Durham, Cardi,
Birmingham, Liverpool and Nottingham
are all good examples o where residential
property prices are relatively low yet rental
rates are rapidly increasing due to the
popularity o the local universities and the
number o students attending them.
Investors have not been slow to catch
on and are capitalising on this. As a result
investment in UK student accommodation
has boomed over the last ew years. CBRE,a world leading real estate adviser, recently
released a report that stated 863 million
was invested into student accommodation
in 2011.
This gure represents a signicant
increase o 93 million compared with 2010
and a staggering 120% increase on the
amount invested in 2009.
This growth trend is certainly continuing
with CBREs latest 2012 Q1 report
highlighting that 246m has already been
invested into the student housing sector
during the rst quarter o this year. I this
rate continues student accommodation
investment will be 12% higher than last year.
246m has alreadybeen invested intothe student housingsector during thefrst quarter o thisyear
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The ace o the UK university
education and, consequently, the
student accommodation market is
changing. Currently there is extremely high
demand to attend university - a demand
that ar out-strips supply. In 2010 there
were over 700,000 applications or just490,000 university places.
This demand looks set to continue
particularly in top-fight university cities.
Knight Frank reports on a fight to quality,
with students seeking the best courses
or their ees. This shit in turn is predicted
to translate on to the student property
market in the orm o an increased
demand or a higher standard o student
accommodation.
AEGON Asset Managements
Kames Capital believes there are huge
opportunities or those investing in thesector. Its head o property investment, Phil
Clark, says: The alternative property sectors
could oer some attractive opportunities in
2012.
In particular I believe investors
should consider a greater exposure to
alternative sectors such
as residential property,
student accommodation orhealthcare property. One
o the key attractions o
these alternative sectors is
they generally have a high
income yield, an ability to
track infation and have low
vacancy rates.
Student accommodation
demand or the bestuniversities is leading to
typical annual vacancy rates
o less than 2%.
Student demand for university places exceeds supply
800,000
700,000
600,000
500,000
400,000
300,000
200,000
100,000
02001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: UCAS
Surplus demand Accepted applicants
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B
ut that is not all. The growth in
university applications has been
signicantly infuenced by a rise in
overseas students which is predicted toincrease even more in the next academic
year.
In 2010 the number o overseas students
applying to UK universities increased by
12.5%, and there were even more in 2011.
Experts have cited the appeal lies with the
quality o university education in the UK
and competitive tuition ees on a global
scale.
Knight Frank believes the demand is
going to keep on growing. Its 2011 student
property report states: Clearly, a UK
university education continues to be held
in high esteem around the world and this
demand is set to expand exponentially in
line with global wealth generation. The
number o UK universities, by comparison,is a nite resource and looks set to remain
so as government budgets are constrained.
In light o the recent increase in
university tuition ees, this growing trend
looks set to continue. The Sunday Times
explained this is because overseas students
have a dierent ees scale and are less
aected by the changes. While higher ees
may deter some domestic undergraduates
and reduce applications, the amount o
overseas students are not only orecastto remain unaected, but are likely to
increase.
With numbers o EU and domestic
students capped, universities are
extremely keen to market themselves
on an international scale to attract more
overseas students. This aects the higher
end o the student accommodation
market as overseas students have a highertendency to choose quality purpose built
accommodation or a number o reasons
including security, location and acilities.
USA 20%
UK 12%
France 8%
China 7%
Australia 7%
Germany 7%
Canada 5%
Japan 4%
All Others 30%
Top host countries of international students 2010
Source: Atlas of student mobility, Institution of International Education
USA
Others
Fr
ChAuGe
Ca
Ja
UK
Source: UK Higher Education International Unit / i-graduate
USA
Australia
UK
Canada
Singapore
New Zealand
Netherlands
Malaysia
China
Germany
0 5,000 10,000 15,000 20,000
Country rankings - average annual tuition fees
for overseas students
Overseas students
have a highertendency to choosequality purpose builtaccommodation ora number o reasonsincluding security,location and acilities
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S
imilar to overseas students, mature
students also opt or higher
quality student accommodation
usually within private, purpose builtdevelopments. The changes in tuition ees
will also have an impact as Knight Franks
2011 student property report explains:
Changes in the way that higher education
is provided in the UK will change the ace o
the student population.
With universities under increasingpressure to provide more two-year degrees
and work-based learning (particularly in
proessions such as surveying, accountancy,
business and media), the number o
mature, part-time and post-graduate
students is likely to increase signicantly, as
is the average age o students.
The growing demand or student
accommodation, especially higher quality
developments, comes at a time when this
type o property is in short supply. And
we all know what happens with limited
supply and growing demand... It is a major
opportunity or investors.
Mature studentsalso opt or higherquality studentaccommodationusually withinprivate,purpose built
developments
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What sets us apart?We understand that purchasing investment property at home or abroad can
developers and agents, its important to work with people you can trust.
We are committed to sourcing only the very best products in our territories
to deliver the desired rewards to our customers and this has been key to
our success. Centred on a set of 5 key principles, we carefully select the bestdevelopments that deliver on price, payment, location, investment and security.
Please note that the information that we distribute is produced with great care and believed to be correct at the time of publishing to
the best of our knowledge. Pictures, layouts and other details in this brochure are given as a general guide and may change from time
any market forecasts we provide are accurate and well researched at all times, however we cannot ultimately warrant the accuracy of
further agreement we may make with you in writing.
info@hanwoodholdings.com
0845 8623090www.hanwoodholdings.com
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